According to a report by the Treasury Inspector General Tax Administration (TIGTA), the IRS must make improvements in their selection process to pursue tax debt cases that are more likely to result in the payment of tax debt. The report suggests that the selection process of the IRS needs to strategically pursue cases that have the highest potential to pay.
In 2013, the IRS collected more than $3 billion dollars from delinquent taxpayers, but wrote off as much as $16 billion in taxes owed as not collectible. This led to more expenditure in pursuing cases and less recovery of taxes. In 2013, 40 percent of the taxpayer delinquent accounts were closed after the IRS was unable to collect the back taxes that they were pursuing.
TIGTA has identified the reasons for this lack of effectiveness or lack of targeted collection action. They are:
- The IRS does not measure productivity or establish specific goals to evaluate case selection eligibility.
- Information systems do not identify case source data, so management cannot fully assess the effectiveness of field case selection requirements.
- Case selection requirements do not consider the age of associated delinquencies, so many assigned cases include older delinquencies that will not likely be collected.
- Case selection criteria do not consider the financial status (such as income) of the delinquent taxpayers, so many of the active cases involve taxpayers with no ability to make payments.
- Case selection criteria do not consider unsuccessful previous attempts to reach or locate the taxpayers.
The IRS complains that it does not have sufficient resources to manage the large inventory of taxpayer delinquent accounts, but also confirms that it will make efforts to collect more in taxes by improving their case selecting criteria among other processes.
After this TIGTA report, there is expected to be seen greater efficiency in the collection of back taxes by the IRS. Therefore, taxpayers that owe back taxes to the IRS may consider initiating resolution of their tax debt case to avoid collection efforts.